DailyFX Analysts Short Euros and British Pounds

• DailyFX Analysts Bearish Euros and British Pounds

Our picks of the week which were published yesterday pointed to further dollar strength. DailyFX Analysts continue to be bullish dollars against Euros and British pounds. Read on to find out why:

Chief Currency Analyst - Kathy Lien

My picks: Short EUR/USD
Expertise: Combining Fundamentals with Technicals
Average Time Frame of Trades: 1-3 Days

The markets continue to be dollar bullish as the EUR/USD enters the "sell-zone." Eurozone retail PMI and consumer confidence numbers are due for release tomorrow and I think that they will be weak, confirming the grim outlook for the Eurozone economy. I am bearish here (1.5695) against 1.5775 for a move down to 1.5600 followed by 1.5500

Quantitative Currency Strategist - Antonio Sousa

My picks: Short EUR/USD
Expertise: Fundamentals, Volatility and Sentiment
Average Time Frame of Trades: 1 week - 3 months

This morning the euro has been selling off against the U.S. dollar and I believe this could be the beginning of a much larger correction in the EUR/USD. Indeed, I expect the dollar to remain strong ahead of Friday’s release of Non-farm payrolls for the U.S. economy. Moreover, I expect the Federal Reserve to be much more aggressive for now on as equity markets start stabilizing. On the other hand, I expect the European Central Bank to cut interest rates faster than traders had previously expected as the euro area economy slows down and inflationary pressures ease. In fact, according to overnight index swaps, which measure interest rate expectations for the next twelve months, traders expect the Fed to be more hawkish than the ECB in the second half of 2008. While the ECB is expected to keep rates unchanged, the Fed is expected to increase rates by 69 bps over the next 12 months. Generally, higher interest rates make holding the U.S. dollar more attractive to foreign investors and the higher level of demand for assets denominated in dollars could accelerate the losses in the EUR/USD. I project the EUR/USD to trade below 1.56 over the next few weeks. Yet, if my assumptions for the price action prove to be wrong, a trader should exit his short position in a daily close above 1.60.

Currency Analyst - Terri Belkas

My picks: Short GBP/USD
Expertise: Fundamentals Combines With Technicals
Average Time Frame of Trades: 1-3 Days

While I doubt we'll see substantial price action over the course of the next day or so, I think the next big move in GBP/USD will be to the downside. Currently, price is holding above support at 1.9850 where we have a rising trendline. However, looking at daily and 240-minute RSI and MACD, it's clear that Monday's rally wasn't able to gain enough momentum to push GBP/USD significantly higher and as long as the pair holds below 1.9950, I will hold on to my bearish bias. Declines from current levels will likely run into a bit of support at 1.9780, where we have the 50% fib of 1.9408-2.0152, but I think 1.9690/1.97 serves as a better target since we have the 61% fib of 1.9408-2.0152 and the July lows there. From a fundamental standpoint, I think the 10:00 EDT release of the Conference Board's US consumer confidence survey could be surprisingly strong given the unexpected revision to the University of Michigan consumer confidence survey last Friday, which could add to the greenback's recent strength.

Currency Analyst - David Rodriguez

My picks: Range trade the EUR/GBP
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks

Currently rangebound markets do not typically work out well for my usual momentum/breakout style of trading, so I'm taking a slightly different approach this week. My recent Currency Trading Market Conditions Outlook report emphasizes that markets are set for smaller price moves in the weeks ahead, and I'd like to take advantage of such a dynamic in the EURGBP. I'm looking to sell rallies to a falling trendline, currently at 0.7930, while buying dips to multi-month lows at 0.7839. Until either resistance/support mark is broken, we'll likely continue to see fairly contained EURGBP price action.

Currency Analyst - John Kicklighter

My picks: Short EURCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week

Price action is relatively stable and volatility low across the currency markets, but there is some heavy economic event risk waiting in the wings. Therefore, I'm looking for a pair that is set within a reliable range for the short-term, with which I can take direction in favor of a potential break. Fundamentally and technically, a EURCAD seems a prime candidate. The pair just recently rose to touch a notable, descending trendline at 1.6140. However, the dominate trend is still to the upside and pull backs could be held up by the rising trendline from the November swing low, the confluence of the 50-day and 100-day SMA, and the 38.2% retracement all around 1.5825/50. As such, targets will need to be reasonable (ie percentages of the the closing range itself), but agressive targets can bank on breakouts to the downside (the ultimate turn of trend).

Fundamentally, we have just seen unexpected stabality in the German inflation numbers - though the euro still slipped a little on the news. I feel this is a sign of the currency's weakness. Nonetheless, I am looking for better entry (closer to 1.6140) as risk would at the least need a stop above today's high and more cautiously would need a stop above 1.6190. Looking ahead to further drivers for price action, the Canadian May GDP figure is due Thursday (as is the US equivalent). This big mix could easily shape interest rate expectations for Canada. The BoC is now looking at only 7 basis points of expected tightening over the coming 12 months (meaning a low proabability of a quarter point hike over the period) and the ECB is looking at 6.6 basis points over the same period. Should growth in Canada rebound, the central bank will better be able to address the sharp jump in inflation with the most recent CPI figures.

Currency Analyst - Ilya Spivak

My picks: Short EURUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

Last week, EURUSD broke out of a Rising Wedge formation formed the initial test 1.60 in April. The pair declined to the 50% Fibonacci retracement of the 06/13-07/15 upswing at 1.5669 and has reversed higher to re-test support-turned-resistance at the 38.2% level (1.5754). We see current pull-up as corrective, with further downside momentum in the near term to bring EURUSD to test long-term trend line support near 1.5580. A break here opens the door for a selloff to 1.53.

Currency Analyst - John Rivera

My picks: Short GBP/USD Below 1.9868
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 3-6 Days

I am bearish the GBP/USD, as the recent CBI retail trade report showed a significant drop in consumer consumption in June and the outlook for July was just as dismal. The housing slump is weighing on the broader economy and will continue to discourage shoppers. Mortagae approvals falling to its lowest level since 1999, shows that credit markets remain sticky and the increasing inventory of homes for sale wil keep the sector from rebounding for the time being. However, the sterling has remained firm depsite the data with the 50.0% Fibo level of the rally 1.9335 to 2.0397 providing support for the past month, Therfore, with a clear break below 1.9868 I would go short with a target of 1.9664 the 7/8 low.

DailyFX

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